1 IS WALMART GOOD for AMERICA? Approved
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Is Walmart Good for America? 1 IS WALMART GOOD FOR AMERICA? Approved: ___________________________ Date: _____________________ Is Walmart Good for America? 2 IS WALMART GOOD FOR AMERICA? A Seminar Paper Presented to The Graduate Faculty University of Wisconsin-Platteville In Partial Fulfillment Of the Requirement for the Degree Master of Science in Integrated Supply Chain Management By Rana Nazzal 2013 Acknowledgments Is Walmart Good for America? 3 I would like to thank all of whom supported me in my journey to ultimately complete my Master’s program and Supply Chain research project. Thanks to members of the University of Wisconsin at Platteville for their guidance, quality teaching and constant supervision in completing the Master’s requirements and developing my final research project. Also, special thanks and gratitude to my family members who supported me every step of the way over the past two years to get to where I am today. Finally, deep appreciation to Professor Wendy Brooke for the support and exceptional guidance and learning experience during the course of my research project. Table of Contents Subject Pages Abstract 5 Is Walmart Good for America? 4 A Glimpse at WMT History 5 Table (1) Walmart Growth by Decade 6 Figure (1) Walmart Quarterly Earnings Since 2005 7 Table (2) Comparison of Retailers Sales in 2006 7 People Make the Difference 8 Supply Chain Management 8 The Merchandising Strategy 8 Technology – the Ultimate Change Agent 9 POS, UPC and EDI 9 Radio Frequency Identification (RFID) 10 Retail Link Data Base 12 Figure (2) WMT Retail Link Data Base 13 Reinventing the Supply Chain 14 Creating Supplier Relationships 15 Purchasing Strategy 17 Negotiation Strategy 18 Logistics Operations 19 Distribution 19 Cross Docking 20 Retail Strategy 20 Inventory Management 21 Expansion Strategy 23 Figure (3) Walmart Expansion Map 24 Green Sustainability 24 Green initiatives 25 Green Packaging 25 Environmentally Friendly Products 27 Reverse Logistics 27 Sustainable Product Index 28 Global Responsibility Report 29 Controversial Impact on America 31 Job Creation and Low-Wage Approach 31 Ethical Practices 34 In Defense of the Controversy 35 Job Creation 35 Economic Empowerment 36 Factual Research and Analysis 37 Job Growth and Creation 37 Impact on Wages 38 Impact on Local Businesses 38 Impact on Taxes 38 Impact on the Environment 38 Impact on Economic Growth 38 Is Walmart Good for America? 5 Controversies Hold True 39 Job Creation 39 Walmart’s Wages and Benefits 39 Competitive Advantage 40 Violating the Law and Social Rights 41 Table (4) represents data in which WMT’s female employees in hourly 41 Table (5) WMT’s female employees are disproportionately in hourly jobs 42 instead of salaried jobs in every district examined Table (6) WMT’s female employees make less than men in every district 42 examined Recommendations from the Democratic staff of the U.S. House Committee 43 on Education and the Workforce Commitments in Economic Renewal 43 Creating jobs to Grow the Economy 44 Honoring the Nation’s Veterans 44 Driving More American Manufacturing 44 Final Remarks 45 Appendix A Walmart Way Principles 47 Appendix B Financial Review 49 Appendix C Interesting Facts about Walmart 51 References 52 Is Walmart Good for America? 6 Is WMT Good for America? Abstract As the largest American retailer in the world, Walmart (WMT) continues to make unprecedented revenues and competes to be the first among the 500 Fortune companies since its inception in the 1960’s. By taking a look into WMT’s world of Supply Chain, the business’ impact on reinventing this industry in America is evident. Due to WMT’s large size and wide range of consumer goods it’s able to supply consumers, WMT’s well-being has been more economically and politically connected. The purpose of this debate is to reach a conclusion on its effect as a business on the U.S. economy by examining various business components including business objectives, supply chain and logistics practices, environmental and structural impacts. This analysis examines the company’s historical supply chain development and explores powerful aspects of their logistics and transportation system. Most importantly, the company has been awarded a reputation of being the leading cause in economically reviving smaller towns in the U.S, yet there are heating controversies and conflicting views about whether WMT has been contributing towards the U.S economy. A Glimpse at WMT History The WMT story as narrated by Soderquist, the retired former Vice Chairman and Chief Operating Officer for WMT took this opportunity to narrate WMT’s inside story and growth history on the hands of owner and founder, Sam Walton. Soderquist described the company’s true culture, which was a lot more than what the end consumer observed from outside the box. WMT established personable experiences with its customers, and an effective method to maintaining relationships with suppliers and end consumers. Additionally, Soderquist addressed how the company reinvented the supply chain industry and further perfected its supply chain network. Despite the controversy surrounding the company’s way of doing business, the retired COO appreciated the public feedback on the business and that this feedback had been seen as constructive criticism to make the company better (Soderquist, 2005). Is Walmart Good for America? 7 Sam Walton once had a dream to serve people well and impact people’s life for good by building a winning team to support his family yet honor his lord, and have fun with it all. Walton started out by treating people well, seeking higher value items and offering customer deals from his small store in Newport, Arkansas. Although he lost his lease in Newport, AK, he kept looking for a new lease and found one store in Bentonville, AK. Sam had passion for his dream that was becoming a reality. He continued to greet and smile to his customers. He sought to learn their needs in products and services that he offered to them. With a vision to open more stores, the business grew until he couldn’t manage the business volume by himself and asked his brother Bud to join in. By 1962, both brothers had already created the largest regional retail chain of 15 stores (Soderquist, 2005). Sam reached out to his customers to understand their needs. He learned that customers across the nations needed a larger assortment of goods at lower prices without having to drive long distances. Although his supplier didn’t agree with franchising larger stores and selling him larger quantities at lower prices, Sam pursued his concept of WMT discount stores despite the risk involved. WMT principle 1: “Every successful venture begins with a dream that requires determination, passion, and willingness to grow if it is to be fulfilled.” (Appendix A – WMT Way Principles) (Soderquist, 2005). Wal-Mart was voted “Retailer of the Decade” in 1989, its distribution costs were estimated at 1.7% of its cost of sales, as compared to the competition. By 1991, the WMT supercenter concept had grown exponentially, and the growth plan created for national, as well as international markets including Mexico. With a committed vision to improve the standard of living for everyday people through great products at lowest prices, sales continued to grow for the company (Soderquist, 2005). By Decade Total Revenue # of Stores # of Associates 1/31/1970 $30.8 million 32 900 1/31/1980 $1.2 million 276 21,000 1/31/1990 $25.8 billion 1,528 275,000 1/31/2000 $165 billion 3,985 1,140,000 1/31/2004 $256.3 billion 4,906 1,500,000 Table (1) Walmart Growth by decade (Source: Soderquist, 2005, p.10) Is Walmart Good for America? 8 Figure (1) Walmart quarterly earnings since 2005. (Source: Northwestern University, 2013) With operations spanning 15 countries in 2006, WMT was already the world’s largest retailer. The company’s well developed supply chain network had enabled its growth. By the year 2006, the competition was catching up by following WMT’s footsteps. The competition clearly borrowed and redefined WMT strategies to fit their network. In 2006, most retailers were using bar codes, connecting better with suppliers and running self-distribution. Retailers such as WMT and Costco never stopped competing on both national and global level. The 10 biggest global retailers in 2006 were (Johnson, 2008): Table (2) Comparison of Retailers Sales in 2006 (source: Johnson, 2008, p.1) Is Walmart Good for America? 9 People Make the Difference The key behind WMT’s success was not so much the everyday lower prices, but the excellent commitment to forge common cultural ground among the hundreds of associates in the organization. Although systems, strategies and infrastructures were extremely vital, people came above all because they made things happen. Appreciating and treating associates well was a prime objective for Walton. He felt people performed best when they were treated well and satisfied with their jobs (Soderquist, 2005). As part of giving workers dignity, the company embraced an open door policy. The policy was established as means for associates to voice their suggestions and concerns. The leadership team set the tone in the organization, offered the environment for success and embraced that people were important. The company believed in promoting leaders from within. The leadership team inspired their associates to learn, develop, and become talented professionals. Over three- quarters of the men and women managing WMT’s stores began as hourly associates (Soderquist, 2005). Supply Chain Management The Merchandising Strategy WMT believed that customers were the only reason the company was in business. This belief was its driving force to offer the greatest value. Consequently, offering value in products and services was a preeminent part of the company’s decision making.